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Bank of America roadmap: Typical correction, then summer rally Add to ...

Despite Tuesday’s gains by major U.S. indexes, Mary Ann Bartels, head of U.S. technical analysis at Bank of America believes that the stock market is in a confirmed correction. The good news? It should set things up for a summer rally.

In a note, she explained that the rule of thumb is that one-third to one-half of the most recent equity rally can be handed back in a correction. So, measuring from the low in October to the recent high in early April, when the S&P 500 surged the 29 per cent, a typical correction would likely send the S&P 500 somewhere between 1250 and 1300. That’s a drop of 11.7 to 8.2 per cent. So far, the benchmark index has fallen just 3.3 per cent, hovering around 1372 in afternoon trading.

If Ms. Bartels is right, then this would invert the old saw, Sell in May and go away.

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